The Dealmakers Forum E-Newsletter, August 7, 2013 - Skilled Nursing Companies Under Census Pressures, Not-for-Profit With Accessing the Low-Cost HUD Debt Market, Leading Age on Frontline Documentary

 

Bringing You Senior Care M&A Deals and News
 

August 7, 2013 Issue:

 

Seniors Housing Weekly Update: 60 Seconds with Steve Monroe
Skilled Nursing Companies Under Census Pressures. Skilled Healthcare Group and Kindred Healthcare both reported declines in patient days, but investors had very different reactions to the results at the two companies. Read More

 

Recent Senior Care M&A Deals

Long-Term Care

Acquirer

Target

Price

American Realty Capital Healthcare Trust

3 Assisted Living Communities

$27,500,000

Senior Housing Property Trust

Gracemont Assisted living and Memory Care

$22,030,000

CNL Property Trust 

The Terrace at Jasper  

$7,300,000

Ohio Provider  3 Ohio Skilled Nursing Facilities $13,650,000

 

Deal of the Week

Most people shudder a bit when a local developer takes his or her first step into the seniors housing market, but in Georgia one developer met with incredible success. In a two-part development project, the campus opened with the first building in 2011, with the second opening in 2012. Stabilized occupancy was reached by April 2013, and by stabilized we are talking about 95%. Except it was at 100% occupancy when the sale closed on August 1. So the buyer, Senior Housing Property Trust, is picking up a brand new campus at 100% occupancy with average revenue per unit of $3,800 per month at a cap rate close to 7.5%. We think they would do that deal every day. Senior Living Investment Brokerage handled the transaction...... Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Stat of the Week

Sometimes, you’ve just got to like consistency. Other than the peak years of 2006 and 2007 when anything with a cash flow was selling at a premium, in eight of the past 10 years the spread between the average skilled nursing facility cap rate and the benchmark 10-year Treasury rate has ranged between 900 basis points and 1070 basis points. It didn’t matter whether interest rates were rising or declining, the spread was fairly consistent. In the past three years (2010 to 2012), the range was even narrower, from 990 basis points in 2010, to 1000 basis points in 2011 to 1070 basis points in 2012. The market is basically saying, in good times and bad, with low interest rates or not, with good reimbursement or governmental pressure, buyers need a certain risk premium for skilled nursing acquisitions. In the outlier years of 2006 and 2007, the spread narrowed to 770 basis points and 750 basis points, respectively. We don’t expect to see that again.....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Financing of the Week

Not-for-profits have struggled with accessing the low-cost HUD debt market, but one large sponsor recently took advantage of the program to reduce debt costs. Front Porch Communities borrowed a total of $55 million to refinance $50 million of existing tax-exempt bonds that had a fixed interest rate of 5.375%. By going to HUD, Front Porch obtained two loans at 2.73% and 2.80% with maturities in 2039 and 2045. Even after adding the mortgage insurance premium to those rates, the new loans reduced the annual debt service on the two properties by 33% and the overall debt service for Front Porch by 8.5%. Cain Brothers was the financial advisor to Front Porch and identified and developed the structure for the two loans. Wells Fargo was the mortgage banker on the deal. Front Porch owns and operates five rental CCRCs and five entrance-fee CCRCs, and also manages 25 affordable housing communities and three market-rate communities....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

Boiling Blood

The head of the not-for-profit organization, Leading Age, didn’t mince words when it came to the Frontline “documentary” that aired on July 30. He wrote to his members that “Laced throughout all of the interviews by former employees and family members was a hidden value of greed over compassion and competence, covered by layers of sweet icing of the trappings of nice facilities. The Achilles’ heel of assisted living is that those who are in it for the money know how to sell sizzle but offer very little steak.” Really Larry? Have you met Granger Cobb? So tell us what you really think about for-profit providers. It seems you are using the same paint brush that Frontline did, but the difference is that you should know better.....Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

 

TOMORROW: Interactive M&A Webcast:
Tax-Exempt Entities: Buying, Selling and Valuing
Wednesday, August 7th, 2013, 1:00 pm ET            
The not-for-profit merger and acquisition market—specifically not-for-profit health care businesses that acquire other not-for-profit health care businesses—is rapidly and continually evolving. Not-for-profits typically raise capital in different fashions and from different sources than for-profit entities. Find out more from our expert panel: Glenn Fox (Moderator), Partner, Saul Ewing LLP; Charles Bissell, National Practice Leader, Seniors Housing & Health Care Practice, Integra Realty Resources; Joseph Lupica, Chairman, Newpoint Health; Jeff Petty, CEO, Wesley Enhanced Living; William Pomeranz, Managing Director, Cain Brothers.
Go to http://www.levinassociates.com/conferences/1308-online-conference or call 800-248-1668 to register.

 

JUST PUBLISHED - The Senior Care Acquisition Report, 18th Edition
Deals have been made. The 2013 Senior Care Acquisition Report contains private deals in this market that are frequently too small to make it into the financial press. Go to http://www.levinassociates.com/landing/scar18order or call 800-248-1668 to order today!

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